A reverse mortgage is a home loan that gives homeowners the opportunity to receive a lump sum of cash in exchange for the equity in their home. The borrower does not have to make any monthly payments, and the loan does not have to be repaid until the borrower moves out or sells the home.While an interest-only loan can provide a downpayment for personal or family use, it is generally not a suitable option for someone wanting to purchase a home. Interest-only loans generally have fixed rates, the rate the lender increases when the loan is used to borrow more money. Variations in the interest rate charged by the lender can have a significant impact on the borrower’s ability to afford the home loan. Up-front payments to buy a house can be attractive to a consumer who has many years ahead of them. The monthly payment while you are in the home can be balanced by the increased income potential when you exit the home and move to where you will finish paying off the loan.
For someone who wants to buy a home but does not want to receive a high interest rate, a fixed rate option geared towards term loans is a more suitable home loan option for them. Fixed-rate reverse mortgages can provide the same amount of debt as interest-only loans, but some fixed-rate Reverse mortgage loans provide several types of equity, including cash, through a deferred sale value and/or a compulsory retirement fund. Being a fixed-rate loan does not give a borrower access to greater flexibility while making a home purchase, but it does give them the option to buy the home they want without worrying about its market value.
If you are married or together with your spouse, a joint or spousal reverse mortgage is a good option for you. You do not have to start paying off your loans until you sell your home.
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